The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the UK dairy farmers' cooperative Milk Link by fellow cooperative Arla Foods. The clearance is conditional upon the divestment of Milk Link's sole long-life milk processing facility located in Devon (UK). The Commission had concerns that the transaction, as originally notified, would have significantly reduced competition on the UK market for long-life milk by bringing together the two leading suppliers of this product in the UK. The commitments offered by the parties address these concerns.

The Commission's investigation showed that the proposed transaction, as initially notified, would have combined the two leading suppliers of long-life milk in the UK, resulting in very high market shares. The Commission's investigation also indicated that many retailers in the UK have a UK only policy for long-life milk meaning that imports are not a viable source of supply for these customers and therefore do not constitute a competitive threat for the two companies.

In order to address these concerns, the parties offered to divest Milk Link's long-life milk and dairy drinks business, including the transfer of brands and the production facilities, located at Crediton (Devon), UK. In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would not significantly reduce competition in the European Economic Area (EEA). This decision is conditional upon full compliance with the commitments.

The transaction was notified to the Commission on 9 August 2012.

Background

The Commission assessed the impact of the proposed transaction on a number of markets for dairy products in the UK where the merging parties' activities overlap. These markets relate to the procurement of raw milk and the supply of non-health fresh flavoured dairy drinks, long-life milk, packet butter, blue cheese, liquid whey and permeate powder.

The Commission also examined a number of vertical relationships arising from the merging parties' activities in the procurement of raw milk and the downstream markets for the supply of fresh milk and fresh cream.

With the exception of long-life milk, the Commission's investigation confirmed that the proposed transaction would not raise competition concerns on any of the markets examined as the increment in market share in most instances was limited or the merged entity would continue to face competition from a number of competitors.

Companies and products

Arla is a dairy co-operative owned by Swedish, Danish and German dairy farmers. It is active in the production and sale of a variety of dairy products with its main markets being Scandinavia, Germany and the UK. It is also active in various whey-based ingredients, such as WPC, lactose, whey powder, permeate powder and others.

Milk Link, a British farmers' co-operative, is active in the production and marketing of cheeses, long-life standard milk, extended shelf life flavoured dairy drinks and packet butter. Furthermore, Milk Link is active in the supply of liquid whey, whey powder and, through its joint venture with Volac (MV Ingredients), whey protein concentrate ("WPC") and permeate powder.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involvingcompanies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).